Clergy Members Receive Special Tax Exemptions

September 9th

According to a recent study conducted by the Wall Street Journal, an astounding number of American clergy members are taking advantage of a law passed by Congress which allows them to buy or live in multiple homes tax-free. These clergy avoided taxes at the same time that many taxpayers are burdened to the point of foreclosure and tax debt.

In 1921, a provision of the tax code referred to as the Parsonage Allowance was passed. It allows an ordained clergy member to live tax-free in a home owned by his or her religious organization or to receive an annual allowance, also tax-free, to buy or rent a home. Closer scrutiny by the US Tax Court has determined that the allowance may extend to as many homes as the clergy requires.

The Parsonage Allowance was originally included as a means of minimizing taxes on clergymen whose compensation was often meagre. However, more recent analysis has shown that it might instead contribute to unequal treatment and invite abuse of the tax system.

Potential for Abuse

The chief concern at present is that the parsonage allowance is open to abuse by wealthier ministries. While some groups claim it is crucial to the livelihood of their clergy, there is worry that other ministries that do not need the allowance may instead choose to take advantage in order to purchase multiple homes.

In addition, a recent case in which a clergyman was arrested for tax evasion demonstrated the capacity for using the parsonage allowance to give special treatment. Though he had been imprisoned for tax evasion, it was ultimately ruled that he owed no federal tax or IRS penalties on the $408.638 provided him to buy a second home.